Monday, May 14, 2007

W.S.S.R.

MERRILL, Wis. (AP)- A service station that offered discounted gas to seniorcitizens and people supporting youth sports has been ordered by the state toraise its prices.

Center City BP owner Raj Bhandari has been offeringsenior citizens a 2 cent per gallon price break and discount cards that letsports boosters pay 3 cents less per gallon.

But the state Department ofAgriculture, Trade and Consumer Protection says those deals violate Wisconsin'sUnfair Sales Act, which requires stations to sell gas for about 9.2 percent morethan the wholesale price.

Bhandari said he received a letter from thestate auditor last month saying the state would sue him if he did not raise hisprices. The state could penalize him for each discounted gallon he sold, withthe fine determined by a judge.

Bhandari, who bought the station a yearago, said he worries customers will think he stopped the discounts because hewants to make more money. About 10 percent of his customers had used thediscount cards.

Dale Van Camp said he bought a $50 card to support thelocal youth hockey program. It would have saved him about $100 per year on gas,he said.

I first saw this story on the net a few days ago and it has been bouncing around in my head for close to a week. I thin today the blood started to trickle out of my ears from the hemorrhage that the sheer “DO WHAT?!?!” has caused me to suffer. The last time I checked this was still a free market economy and retailers (unregulated ones of course) we free to charge whatever the hell their conscience will allow.

I am quoting here from the National Federation of Independent Business’s website:

According to Wisconsin's Unfair Sales Act (also known as the minimum mark-uplaw) it is illegal (with certain exceptions) to sell products at retail at lessthan cost with the intent or effect of diverting trade from a competitor. Cost(other than motor vehicle fuel) is determined as the lesser of the invoice costor replacement cost of the merchandise. Minimum mark-up requirements do notapply to merchandise sold in clearance sales, damaged goods and merchandise atrisk of spoiling. The minimum mark-up requirements also do not apply if themerchandise is priced in good faith to meet the existing price of a competitor.

Correct me if I am wrong, but isn’t the whole idea of running a business to divert business away from a competitor? And if I, as a business owner am willing to take a hickey on an item to get you in the door, who the hell is the government to tell me I can’t? This sounds an awful lot like the way an economy of a certain former Soviet Republic was running right before it collapsed in on itself.

The website goes on to say that the law was designed to keep small town America from losing local businesses to the “mega” retailers. But here’s the thing on that topic, those “mega stores” were once a local businesses that made their business model work. Why should they be punished for their success? If your town is truly upset about losing local businesses to the “mega stores” the answer is simple…don’t give them you patronage. That’s how a free economy works. Take your business to the local retailer. I do, whenever I can, but it is hard to pay 10-20% more at the local place over Wally World. I do not think that it is the state or federal government’s place or responsibility to make sure my business succeeds. That is my job.

Oh - it gets better. The gas prices in Wisconsin, particularly SE Wisconsin, are consistently higher than surrounding states and the rest of the nation. Last summer, when prices shot up to over $3.75 per gallon, the state launched a huge "investigation" of why our prices were so much higher than everyone else's.

Well, duh - do you think that 9.2% might have something to do with it?

The investigative panel, of course, reached no firm conclusion on why our prices were higher.

I'm pretty sure this is a case of damned if you do and damned if you don't. Laissez-Faire didn't work before, it wouldn't work now. Isn't the definition of insanity doing the same thing over and expecting different results?

quoteHammer said... Utterly retarded. I want the government out of the economy. Laissez-faire all the way or we are eventually doomed.

Look at it this way: Your town has some gas stations, a bunch if independents and a bunch of Monopoly Oil stations. Monopoly Oil decides it doesn't like the indies, so it sells at a loss to force the indies out of business.

Monopoly Oil isn't stupid though. After the Indies die, Monopoly Oil raises their prices to higher than a free market would allow, and *BOOM* profit!

This is what the Wis. law is designed to fight. And it isn't this law that makes the prices is SE Wis. so high, it is the useless Milwaukee region clean air laws and taxes that are causing the pain at the pump.

anonymous: Except that for over a century that has never worked in the states that don't have such a law.

Standard Oil tried it for kerosene (then used for lamp oil by nearly everyone) well over a century ago, when they had over 50% of the production to start with - but it didn't work nearly as well as bribing railroads to not carry competitor's products, cutting pipelines, and bribing police and government officials to look the other way. They'd have had even more success if people had been used to the sort of regulations we have nowadays - they could have bribed the government to actually interfere with their competitors instead of just to not enforce laws.

The law goes back to the robber-baron days, when the railroad monopolies would stifle competition by offering "rebates" (read: kickbacks) or by dropping their prices to far below the break-even point. It would cost the rail monopoly some short-term profit (which they could make up on their other operations), but their startup competitor would be driven out of business. After the monopoly was again the only provider in the market, they would reraise their prices to wherever they felt like. The purpose of the law was to insure that competition COULD break into the market- especially local competition, against large conglomerates.

If y'all were arguing that the law in this case was being applied inappropriately by an officious bueraucrat I'd agree with you, but on the law itself you have the wrong end of the issue.